We rarely incorporate geopolitical developments into the daily news flow of the FX and CFDs brokerage industry, but given the repercussions to some brokers today we will pay attention to what US President Donald Trump said yesterday.
Trump vociferously elaborated on the state of the Iranian deal and has pledged that the United States will withdraw from the agreement. For the time being, the European countries are far from taking on the same course of action, but given the far-reaching hand of US sanctions, the likelihood that the Iranian FX and CFDs market will be closed for good is material.
Payment Processing Difficulties
Iran is already low on the radars of brokerages that are regulated in reputable jurisdictions. The majority of major firms which we surveyed are not accepting clients from the country despite the establishment of the deal between Iran and the US, UK, France, Germany, Russia, and China in 2016.
Payment processors have had a very difficult time funneling money out of the country, with the companies to which we spoke stating that while difficult, some business is possible. That, however, is very likely to change in the near future as the US takes a hard line against Iran under the Trump administration.
As the market opened on Wednesday, shares of US commercial airplane maker Boeing and European EADS have tanked lower as the firms have to cancel orders from Iran. The repercussions for any company that is willing to do business in Iran are unknown with the far-reaching arm of US sanctions impacting companies from all over the globe.
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Trump Committed to Isolate Iran
With the strategic effort of the administration of Donald Trump to isolate North Korea from the rest of the world yielding unprecedented peace talks and a summit between the US President and Kim Jong Un, the likelihood that the US will employ the same tactic against Iran is significant.
As the left-leaning European press calls Trump a “master of chaos” this morning, the likelihood that European allies will follow the US lead appears to be slim. The UK and France have earlier today pledged to coordinate efforts to work with Iran on the matter.
The Far-Reaching Arm of US Law
While unregulated and loosely regulated brokers may choose not to adhere to any rules and continue to target Iran, they should be aware that the arm of the US law is far reaching beyond its borders.
Several banks outside of the US have been subjected to material repercussions stemming from transactions with entities which are on the US sanctions lists. Any risks to the parties that are dealing with Iranian residents may be material, due to the close association of the Iranian state with terrorism, as cited by Donald Trump last night.
$2.5 Billion of Crypto Purchases
Iranian residents are already widely active on the cryptocurrency market with Reuters reporting earlier today that the equivalent of $2.5 billion was sent out of the country to purchase cryptos.
The lifting of cryptocurrency sanctions is not likely to deter any activity on the part of residents, but local authorities are already worried enough. The Chairman of the Economic Commission of the Parliament of Iran expressed his worries about the vast sums of money that are leaving the country for the purchase of cryptocurrencies. Iran also announced its ambitions to build a cryptocurrency of its own.